We have seen markets plummet since the elections over last weekend, down to lows of 2012 as investors took flight from stocks at risk of being dragged down by troubles in the Eurozone. This sell-off seems to have been triggered, at least in part, by fears that a planned coalition government in Greece will tear-up the austerity deal underpinning the country’s recent €240billion (£190billion) bail-out.
The FTSE 100 Index saw £26 Billion wiped off its value following a further slide of over 100 points. This is a third day running of major sell-offs across most stock markets following concerns over the future of the Eurozone.
Alexis Tsipras, whose Syriza party came a surprise second in Sunday’s poll, is insisting his country’s bailout deal with the EU and IMF is ‘null and void’.
As well as uncertainty over Greece, fears that Spain will need to bail out its banking sector caused that country’s 10-year bond yield to soar again above the ‘unsustainable’ 6% level. This is perilously close to the 7% interest rate on government borrowing that prompted Greece, Portugal and Ireland to seek bailouts.
Financial analysts said the current market turmoil was likely to continue. It appears unlikely that a Greek coalition would be formed considering the rhetoric from the various party leaders, so uncertainty was likely to reign for a while.
‘The worst case scenario for the EU is if Greece leaves the Eurozone and undertakes a disorderly default. It is difficult to see why the country would do this but then again it only takes one angry politician to change history – Greece is staring into the political and financial abyss. Whilst a less likely scenario, if it did happen it could have huge ramifications for the rest of Europe.
A default for Greece looks likely and a departure from the Euro in the next 18 months is expected – this scenario has in excess of 66% outcome expectation – good chance of happening. Greece would not be allowed to walk away from its debts and financial obligations, if it leaves the euro. The likely scenario would be it would be given a greater period of time to repay its debts. The sanctions against Greece, if it attempted to renege on its debts, does not bear thinking about.
These are grave concerns and the ramifications for the Eurozone, global economic prosperity and stock markets are huge.
Investing is about taking best advantage of the market cycle while avoiding the periods of market panic – I am pleased to say, we hold a defensive strategy across all my clients and so we have avoided the worse of the declines and are well placed to benefit from the market opportunities expected to be created by the current market turmoil.
My contact details are :- tel 029 2020 1241, email welshmoneywiz@virginmedia.com, twitter welshmoneywiz, linkedin Darren Nathan
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